Shunned by the West, Russia’s IT sector goes on the defensive


Russia has tried to stem a brain drain by offering IT workers new benefits, but some fear the industry is doomed.

The past nine months have been tumultuous for Russia’s IT sector, according to Anastasia, a 24-year-old web designer from Moscow.

After the outbreak of the war in Ukraine, her studio was forced to tighten project budgets and deadlines.

Yet the biggest change by far is a feeling of uncertainty about the future.

“No one really knows what tomorrow will hold,” she said.

Following three decades of quiet development, the IT sector has suddenly found itself on the defensive.

Sanctions and the mass exodus of multinational corporations have eroded the industry’s access to foreign capital and technology.

And tens of thousands of Russian IT specialists have left the country since the beginning of the conflict.

President Vladimir Putin has admitted that the Russian IT sector will face “colossal” difficulties as it seeks to contain the fallout from international sanctions.

At the same time, however, some industry insiders argue that the crisis could present an opportunity for Russian tech companies to reconquer the domestic market and ease their technological dependence on the West.

In a world where advanced technologies reign supreme, the ability of the Russian IT industry to adapt to new realities will likely be key in determining whether Moscow can keep up economically and militarily with the rest of the world in the long run.

The sector found itself estranged from the West almost overnight after the outbreak of the war in Ukraine in February.

The United States and 37 other countries imposed export controls that restricted Russia’s access to strategic technologies such as semiconductors, microelectronics, telecommunications equipment, sensors, lasers and aircraft components.

US President Joe Biden’s administration also blacklisted more than a dozen Russian tech companies and institutions.

Even measures not directly aimed at the IT sector have impacted the industry’s work.

Financial sanctions have made it difficult for IT companies to send or receive payments from abroad. Logistical sanctions have made it more expensive and complicated for foreign tech vendors to ship their hardware to Russia.

All these difficulties, combined with the threat of reputational damage, prompted a mass exodus of Western tech giants from Russia.

Some companies that have quit Russia in recent months include Microsoft, IBM, Oracle, Intel, SAP, Cisco Systems, Adobe and Nokia.

Anastasia, who requested Al Jazeera uses only her first name to protect her identity, said that before the war, her design studio earned “very big money” from projects for Western firms.

Their sudden departure has forced the studio to scramble to find new sources of revenue, a difficult task given that Russian companies are not willing to pay like the Western giants.

At the same time, Anastasia said, Russian specialists are gradually adapting to life under sanctions.

She explained that many companies were still able to access Western software through VPNs and pay for them using cards issued by foreign banks.

In other cases, it was possible to replace Western systems with domestic alternatives.

“At first it seemed that everyone would leave and we wouldn’t be able to do anything, but we are finding ways to continue working and living as before,” Anastasia said.

Brain drain

Overcoming Western sanctions is not the only challenge facing the Russian IT industry.

The Russian Association of Electronic Commerce estimated that 50,000 to 70,000 IT specialists left the country in the first several weeks of the war.

A lower figure was offered by the Russoft software developer’s association, which said about 40,000 IT workers moved abroad during the first half of 2022.

This wave of migration has sparked concerns about the threat of a potential brain drain.

Even before the war, Russia’s IT sector lacked 500,000 to 1 million specialists to fully meet its needs, according to data from the Ministry of Digital Development.

The Kremlin has sought to stem the outflow of IT personnel by offering new benefits to stay, including deferments from military service, exemptions from paying income tax, preferential mortgage rates and additional funding for grants.

Valentin Makarov, head of Russoft, told Al Jazeera that these measures have helped restore some sense of calm and stability.

Most companies he’s in touch with did not lose many personnel.

The problem “is of course bad, but not critical”, he said.

Makarov said most IT specialists who have left continued to work remotely for Russian companies.

But a more pessimistic assessment was offered by Anastasia, who said many of her colleagues and former classmates left the country after the war started.

“I often joke that I currently have more friends in Turkey and other popular immigration destinations for Russians than in Moscow,” she said.

Anastasia explained that the single biggest driver for emigration was uncertainty.

Although the Russian IT community had long been more opposition-minded than the general public, the war represented the first time that politics directly impacted its everyday life.

“What I constantly hear from my friends who left is that they no longer feel safe in Russia,” she said. “The current nervous atmosphere is not conducive to work.”

According to her, the government’s new benefits are insufficient to temper fundamental concerns about Russia’s long-term direction.

She warned that the loss of these specialists could have serious negative effects in the long run.

“We aren’t really feeling the consequences of migration yet, but I suspect that the shortage of high-quality specialists will become noticeable later down the line,” she said. “The departure of excellent specialists means that there will be less great ideas and ambitious projects in the future.”

‘New technological order’

So can the Russian IT sector overcome these challenges and find ways to keep innovating?

The answer by some in the industry is unequivocally yes.

At a news conference in Moscow last week featuring some of Russia’s most prominent IT developers, the panelists argued that the mass exit of Western tech giants was stimulating Russian firms to develop their own solutions.

They also contended that Russian companies had the potential not only to reclaim the domestic market but also to make serious inroads into Latin America, Southeast Asia and the Middle East.

“The government and IT companies need to make a decision: Are we limiting ourselves to just replacing or supporting the software of departed Western companies, or is our goal to become a leader in an emerging new technological order,” said Makarov, who led the discussion.

“Russia has proven that it can be a leader in the sphere of information security and export technological sovereignty to other countries,” he said. “… We can use cybersecurity platforms to build and promote other Russian technological applications on the global market.”

Source: Alja Zeera